Posted by Pete Stolcers on May 23

Posted 9:15 AM ET – Yesterday the market staged an early rally and it was trapped in a tight range the rest of the day. In the last week we’ve seen a 2% correction and a snapback rally. The FOMC minutes tomorrow could spark another round of profit-taking.

We are currently in a news vacuum. Flash PMI’s will be posted tomorrow, but they mean less now the China doesn’t provide this data.

Global economic growth is moderating and recent domestic numbers have been solid, but not strong.

The Fed cited seasonal weakness in Q1 and stronger growth in Q2. They have an aggressive tightening agenda and the recent market rally will provide them with a window of opportunity. If stocks would have tumbled into the June FOMC, they might have reconsidered. As this level, I believe they will hike in June.

Trump is out of the country and temporarily out of the headlines. His budget will be scrutinized this week and we can expect media criticism. I don’t believe it will have much of a market impact.

Swing traders should have been selling out of the money bullish put spreads the last few days. You should have your positions on and your stops in place. If the stock breaches technical support, buy back your put spreads. You should be far enough out of the money where a dip (FOMC minutes) won’t put you in harm’s way. This strategy will allow you to take advantage of time decay.

I’m expecting another round of selling before the June FOMC. I will not buy calls until we have tested the 100-day moving average.

Day traders need to tread very cautiously. Trim your activity and your size. Trading volume is anemic and we can expect tight daily ranges. Use the first hour range as your guide. I will not trade the first 90 minutes and I will spend the day looking for 1 or 2 good trades.

Support is at SPY $238 and $239 and resistance is at the all-time high.
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